How to get out of debt

Prioritising your debts may help you feel more in control of your money.

You could start by drawing up a budget that looks at your spending and assesses how much you have available to repay each month. If you can, look at any areas where you could cut back to free up more money.

Once you know how much you have available for repayments, you may want to make a plan using one of the methods below.

If the amount you have available isn't enough to meet your repayment terms, you may be able to make arrangements with your lending providers to make things more manageable. Remember, if your debts do feel too much, you can always get in contact with either your bank or government services for help.

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Method 1 – Pay off the most expensive debt first

Typically, a cost effective option is to repay the debt with the highest interest rate first, as it's charging you the most to borrow the money.

List out your debts in order of interest rate, going from highest to lowest. Prioritise paying the debt at the top, working your way down the list over time.

Remember, you'll still have to meet the minimum repayments on all your debts.

Method 2 – Pay off the smallest debt first

While it may not be the most cost effective method, some people prefer to pay off their smallest debts first so they can reduce the number of debts they have to think about.

If you feel this may suit you, list out all your debts with the smallest debt at the top and the largest debt at the bottom. Prioritise paying the debt at the top, working your way down the list over time.

Again, you'll still need to meet the minimum repayments on all your debts.

Method 3 – Debt consolidation

If you're finding juggling multiple debts too stressful, a debt consolidation loan can be a way to simplify your repayments and get back on track. A debt consolidation loan merges debts, giving you:

  • a single interest rate
  • recurring repayments
  • a clear loan term

This can help make managing your debts feel less stressful. However, it’s important to work out if it'll mean having to repay more on a monthly basis and over the course of the loan.

The amount you borrow, loan term and interest rate will determine how much interest you have to pay over time – you can use our calculator to estimate how much this could be.

Next steps

Whatever method you choose, try to repay as much as you can each month to reduce the amount of interest you're charged.

Typically, on a credit card you can repay any amount above the minimum repayment, but on a loan there may be some conditions. Check you won't be charged for early repayments or overpayments.

Explore: How to repay debts faster

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